How To Start A Medical Practice In 2025 [Step-By-Step]

For many physicians, the decision to start their own practice can be a difficult one.

While many physicians understand the rewards, others focus on the risks.

That risk focus leads to doubting if they can launch a successful private practice from the ground up.

Opening a private practice is no easy feat, but with guidance and determination, it’s not as hard as you may think.

If you’re considering leaving your hospital or healthcare system, here’s how to start a medical practice.

Ready to Start Your Own Medical Practice?

According to the AMA, approximately 46% of practicing physicians own their own practice, 65% of which are in surgical specialties. Of those physicians, 15% of physicians own a solo medical practice (17% of those are in surgical specialties).

From primary care to cardiology, physicians have the option to become their own boss and put their health system days behind them. Yet many fear that they will not be profitable or successful.

Commonly, physicians contemplating going into practice on their own face shared perceived barriers.

Some worry about the start-up costs. Some doubt their ability to draw patients. Others worry about hiring, staffing, medical billing, and how long it will take to see a positive cash flow.

All are valid concerns, but they aren’t roadblocks. They’re simply obstacles that you’ll need to overcome.

Like any small business just starting out, it will take time to get your new practice operating and turning a profit. If you’re thinking about opening your own practice, it’s best to focus on the rewards — yet still consider the risks.

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Reasons to Start Your Own Medical Practice

Every physician has their reason for wanting to open their own practice.

1. Autonomy

Some are looking for autonomy and want to have complete control over the decision making for the type of patient care they provide.

As your own boss, you can purchase the kind of medical equipment you want. You won’t have to fill out any request forms or wait for approval from the hospital administration.

As a physician in private practice, you can also adjust the office workflow to how you practice. You have total control over hiring your staff and other medical professionals to support your practice.

You can also provide the type of care you want, such as focusing on underserved populations or providing concierge services.

2. Lifestyle

Lifestyle is another key reason that so many physicians choose to go into private practice. According to Medscape, 49% of physicians would accept a salary reduction in exchange for more free time.

When you own your practice, you can decide how many hours to work, how many vacation days to take, and how much time you want to spend with patients. Work-life balance is more important than ever.

3. Income

Another reason to go into business on your own is the earning potential. As the boss, you have the potential to earn considerably more money than you’ll ever make as an employee for a healthcare system or hospital group.

Not sure if you’re ready to open a practice on your own? There is also the option to go into business for yourself as a partner in a group practice.

If you decide to become part of a group practice, the first thing you’ll need to do is hire a lawyer to draft a partnership agreement between you and the other physician partners. Once that has been signed by all partners, you can proceed with setting up the practice in a way that you all agree on.

If you’re searching for autonomy, a better lifestyle, or higher earning potential, here is our step-by-step guide to opening a medical practice.

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Step 1: Preliminary Tasks

Before you tender your resignation and lease a medical office, there are some preliminary steps you’ll need to take.

Gather Information

First, spend some time gathering information. The fact that you’re reading this article right now is an excellent indicator that you understand the importance of research. Unfortunately, reading articles online isn’t enough.

It can be beneficial to network with physicians that have already done the work of opening their own practice. Many will be willing to provide advice. Some may even be willing to recommend payroll services and staffing solutions for legal professionals and accountants.

With a bit of research, it will become quite clear that setting up your own medical practice is a complex endeavor. It’s at this point that you should decide if you want to build your business on your own or enlist the services of a start-up expert.

Determine a Location for Your Practice

For many physicians, where to open a practice is one of the most challenging decisions to make.

Besides your personal preferences about where you want to live and work, you should also research the physician-to-population ratio in that specific city, town, or region. For your practice to succeed, you’ll need to work where there is a need for physicians in your specialty.

One way to determine this is to see if local hospitals are recruiting physicians in your specialty. If they are, there is a need.

Another way to determine the supply and demand in a particular region is to assess patients’ average wait time. The longer the wait time, the greater the need.

Secure Financing

Starting a medical practice requires significant financial investment, covering costs such as office space, equipment, staff salaries, insurance, and technology.

Understanding the available financing options and preparing strong financial documentation can help secure the necessary funding while ensuring long-term financial stability.

Open a Business Bank Account

Open a separate bank account for your business. Most insurers will transfer your payments directly into your bank account.

These payments should always go to your business, not to you personally, of course.

You’ll also need to order business checks for those rare cases when you may need to refund a patient for an overpayment.

Types of Financing for Physicians

Medical practices can be financed in several ways, each with pros and cons.

Physicians should choose based on credit, risk tolerance, and financial goals.

Financing Option	Pros	Cons
Traditional Bank Loans	Predictable repayment, lower interest rates	Requires strong credit, collateral, and longer approval times
SBA Loans	Lower interest rates, government-backed	Lengthy approval process, extensive documentation required
Medical-Specific Loans	Tailored for physicians, higher approval rates	May have higher interest rates than SBA loans
Private Investors	No repayment obligation, possible large capital infusion	Profit-sharing or equity loss, shared decision-making
Personal Savings	No interest or debt	Higher personal financial risk, depletes emergency funds

1. Traditional Bank Loans

Banks offer small business loans tailored for medical professionals, often with competitive interest rates. To qualify, applicants typically need:

• A strong credit history
• A detailed business plan with financial projections
• Proof of steady income or collateral

These loans provide predictable repayment schedules, but approval can be challenging without an established financial track record.

2. Small Business Administration (SBA) Loans

SBA loans are government-backed loans designed to help small businesses, including medical practices. Popular SBA loan options include:

• SBA 7(a) Loan – Ideal for startup costs, real estate, and equipment purchases.
• SBA 504 Loan – Used for purchasing office space or major assets.
• SBA Microloans – Smaller loans (up to $50,000) for equipment, working capital, or minor expenses.

SBA loans generally have lower interest rates and flexible repayment terms, but the approval process can be lengthy and requires extensive documentation.

3. Medical-Specific Loans and Lines of Credit

Some lenders specialize in medical practice financing, offering tailored loan products such as:

• Practice acquisition loans for buying an existing practice.
• Medical equipment financing to cover essential purchases.
• Working capital loans to assist with early operational expenses.
• Business lines of credit to provide flexible access to funds as needed.

These loans often feature higher approval rates and better terms for physicians, as lenders recognize the stability of the healthcare industry.

4. Private Investors and Partnerships

Physicians may seek funding from private investors, medical groups, or hospital partnerships.

These arrangements typically involve:

• Equity financing, where investors receive a percentage of practice profits.
• Hospital support agreements, where hospitals provide startup capital in exchange for referrals or employment commitments.
• Partnership buy-ins, where a physician joins an existing practice by purchasing a share of ownership.

Private funding can reduce personal financial risk, but it may come with shared decision-making responsibilities or profit-sharing agreements.

5. Personal Savings and Alternative Financing

Some physicians opt to self-fund their practice using personal savings, home equity loans, or retirement funds.

While this eliminates debt obligations, it also increases personal financial risk.

Crowdfunding and grants are also emerging financing options for niche or specialized practices.

Preparing a Pro Forma Financial Statement

A pro forma financial statement is a financial forecast that projects revenue, expenses, and cash flow for the first few years of the practice.

Lenders and investors use this to assess financial viability before approving funding.

A strong pro forma should include:

• Startup Costs – Office lease, renovations, medical equipment, technology, legal fees, and marketing expenses.
• Revenue Projections – Estimated patient volume, insurance reimbursements, and out-of-pocket payments.
• Operating Expenses – Staff salaries, office supplies, insurance, and administrative costs.
• Break-Even Analysis – The point where revenue matches expenses, indicating when profitability is expected.

Using conservative and realistic estimates demonstrates financial responsibility and increases the chances of loan approval.

Consulting a financial advisor or accountant can help ensure accuracy.

Choosing the Right Lender

Engaging with lenders who specialize in the medical field can offer significant advantages, including:

• Favorable loan terms tailored to physicians’ financial situations.
• Deferred repayment options to accommodate slow revenue growth in the first year.
• Industry-specific financial advice on managing cash flow, insurance reimbursements, and operational expenses.

Before choosing a lender, compare interest rates, repayment terms, and loan conditions to find the best financing fit for the practice’s needs.

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Step 2: Address First Line Tasks

Once you’ve addressed your preliminary tasks, it’s time to start tackling these first-line tasks:

Make Your Business Legal and Official

First, incorporate your business so that it’s a legal business entity. For a small investment, you can hire an attorney to handle this for you. Within a few weeks, your business will be legitimate, and you’ll be able to get a tax ID number.

Second, select your office space. Necessary forms will likely require your medical office’s address. Prepare to hire a commercial real estate professional to take you on tours of vacant office spaces.

Next, obtain your National Provider Identifier (NPI). Issued by the Center for Medicare and Medicaid Services, its purpose is to identify your office (or you) as an individual physician. You’ll need an NPI for billing purposes.

Open a Bank Account

Open a separate bank account for your business. Most insurers will transfer your payments directly into your bank account. These payments should always go to your business, not to you personally, of course.

You’ll also need to order business checks for those rare cases when you may need to refund a patient for an overpayment.

Select Your Insurers

You’ll need to contact insurers and undergo credentialing to accept patients under different insurance plans.

Medical providers in private practice can decide which insurance companies they want to work with. It’s necessary to go through the credentialing process for each one selected.

Other critical first-line tasks include:

1. Obtaining malpractice insurance
2. Filling out forms required by the DEA (so that you are legally allowed to prescribe controlled substances)

There are nearly a dozen preliminary tasks and first-line tasks that you’ll need to address before opening your own practice.

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Step 3: Address Second Line Tasks

These second-line tasks are no less important than the first-line tasks detailed above.

However, the first-line tasks are separate because they are necessary to complete prior to credentialing.

Business Insurance is a Must

Other than business insurance, you’ll also want:

• Workers compensation insurance for your future employees
• Business auto insurance (if you intend to lease a vehicle for your practice)

These are separate policies required in addition to medical malpractice insurance.

Hire an Office Manager

Hire an experienced office manager that can handle everything from human resource concerns to staffing issues to billing and coding. This person will play a crucial role in your business, so vet candidates thoroughly and hire someone with substantial medical practice management experience.

Create Contracts, Determine Salary Rates, and Define Benefits Packages for Your Employees

Before you can start the hiring process, you’ll need to decide how you will pay and provide benefits to your employees.

Determine employee salaries, decide which type of health insurance you want to offer them, and think about any retirement plans or other benefits that you want to extend. From PTO to 401k plans, establish your employee salary and benefits package before you start to interview and hire staff.

When you begin the hiring process, be sure to have employee contracts drafted and ready for new hires to sign.

Decide Which Systems to Use

Choose your preferred payroll system, determine which billing system you want to use, and select a software system for electronic medical records.

At this point in your preparation, you should also start looking for a few key roles to outsource.  Most private practice physicians tend to outsource accountants, attorneys, payroll services or bookkeepers, and financial planning advisors.

Medical equipment and office supplies are also crucial elements to order at this stage of your business plan. You’ll need furniture, computers, copiers, and other essentials set up and ready to go on day one.

There are more than 15 second-line tasks you’ll need to address to open your own practice.

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Step 4: Address Third Line Tasks

You’ve set up your business legally, acquired the necessary insurance policies, and made the biggest decisions. Now, it’s time to get into the nitty-gritty details of what you’ll need to run your own practice.

Here is an overview of a series of third line tasks you’ll need to address before you can open your practice:

• Determine your fee schedule
• Choose a Clearinghouse service to ensure that your patient billings are “clean”
• Obtain HCFA 1400 paper billing forms if you’re handling billing in house
• Order ICD 10 and CPT coding books
• Set up a system to accept credit card payments
• Purchase standard medical supplies such as gloves, gauze, and cleaning wipes
• Get disability insurance if you don’t already have it
• Hire an answering service to take calls when you’re not in the office
• Hire a medical waste disposal service
• Contract with a service to shred documents
• Create patient forms
• Develop letterhead
• Obtain the OSHA policy handbook
• Display your state medical license and medical school diploma or residency certification.

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Starting Your Own Practice Takes Time and Patience

Whether you intend to work independently with one or two staff members or bring other healthcare providers and physicians onto your team, setting up a medical practice takes time, patience, and dedication.

Establishing your medical practice can be stressful. What’s important to know is that all physicians, regardless of specialty, have to deal with some stumbling blocks along the way.

Yet, there is a way to create your own practice without having to shoulder the burden alone. At Physicians Thrive, we have physicians on staff who have already built successful practices and can help you do the same.

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Starting a medical practice can be overwhelming. But if you make it a success, you can enjoy the autonomy of being your own boss. Revel in the freedom to work when and how you wish, and earn more than you ever would as an employee of a hospital or healthcare system.

From walking you through the preliminary tasks to preparing you for opening your office on day one, Physicians Thrive is here. If you’re ready to take the leap from employee to business owner, contact Physicians Thrive now.